Mortgage financing in Ontario is often described in three tiers. Understanding which tier a proposal comes from tells you a great deal about what to expect from it.
The three tiers, briefly
- Traditional lenders — banks, credit unions, and monoline lenders operating under standardised guidelines. Lowest cost when you qualify.
- Alternative lenders — regulated institutions and mortgage investment entities applying more flexible guidelines at higher cost.
- Private lenders — individual investors, syndicates, and mortgage investment corporations lending primarily against equity, short term, at the highest cost.
Side by side
| Alternative lending | Private lending |
|---|---|
| Regulated institutions and licensed entities | Individual investors, syndicates, or MICs |
| Income and credit reviewed, with flexibility | Primarily equity and property driven |
| Terms commonly one to three years | Terms commonly six to twelve months |
| Usually amortising payments | Frequently interest-only |
| Moderate premium over prime rates | Substantially higher rates plus fees |
| A stage on the way back to traditional lending | A tool for a specific, time-limited problem |
When each may be appropriate
Alternative lending tends to fit ongoing situations — self-employed income that is hard to verify, a credit event that is recent but resolved, a debt consolidation that needs more flexibility than a bank allows.
Private lending tends to fit acute situations with an end date — a closing that must happen, arrears that must be cleared, a property that will be sold or refinanced within months.
Every short-term mortgage needs an exit
The cheapest-looking option is not always the most suitable one — and the most available option is not always the right one either.
This article is general information only. It is not a commitment to lend, an approval, or legal, tax, or financial advice. Mortgage availability, rates, terms, fees, and approval depend on the applicant, the property, lender requirements, and applicable law. Please review your own circumstances with a licensed mortgage professional.